[Federal Register Volume 65, Number 131 (Friday, July 7, 2000)]
[Notices]
[Pages 41997-41998]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17223]


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FEDERAL TRADE COMMISSION

[File No. 992 3313]


Office Depot, Inc.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before July 31, 2000.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 600 Pennsylvania Ave., NW, Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Joel Winston or Michael Dershowitz, 
FTC/S-4002, 600 Pennsylvania Ave., NW, Washington, DC 20580. (202) 326-
3153 or 326-3158.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of 
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby 
given that the above-captioned consent agreement containing a consent 
order to cease and desist, having been filed with and accepted, subject 
to final approval, by the Commission, has been placed on the public 
record for a period of thirty (30) days. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for June 29, 2000), on the World Wide Web, at ``http://www.ftc.gov/
ftc/formal.htm.'' A paper copy can be obtained from the FTC Public 
Reference Room, Room H-130, 600 Pennsylvania Avenue, NW, Washington, DC 
20580, either in person or by calling (202) 326-3627.
    Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room 159, 600 Pennsylvania Ave., NW, 
Washington, DC 20580. Two paper copies of each comment should be filed, 
and should be accompanied, if possible, by a 3\1/2\ inch diskette 
containing an electronic copy of the comment. Such comments or views 
will be considered by the Commission and will be available for 
inspection and copying at its principal office in accordance with 
Section 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement containing a consent order from Office Depot, 
Inc. (``respondent'').
    The proposed consent order has been placed on the public record for 
thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
agreement and the comments received, and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
order.
    Respondent advertises, sells, and distributes office products, 
including personal computers. This matter concerns allegedly false and 
deceptive advertising claims regarding the sale of a $1,049.97 Compaq 
Presario 5716 computer system based upon a $400 rebate that required 
consumers to enter into a three year contract for Internet service and 
the sale of a ``free'' emachines computer based upon a similar $400 
rebate.
    The Commission's proposed complaint alleges that respondent falsely 
claimed that the total cost of a Compaq Presario 5716 computer system 
was $1,049.97. In fact, in order to obtain the system for $1,049.97, 
consumers were required to subscribe to CompuServe Internet Service for 
three years at an additional cost of $21.95 per month or a full payment 
of $790.20. The complaint also alleges that in representing that the 
total cost of the computer system was $1,049.97, respondent failed to 
disclose or failed to disclose adequately that: (a) Consumers were 
required to subscribe to CompuServe Internet service for three years at 
an additional cost of $21.95 per month or a full payment of $790.20; 
(b) consumers who cancel the Internet service within three years must 
repay the entire $400 rebate and pay a $50 cancellation fee; and (c) 
CompuServe does not provide local access telephone numbers for its 
Internet service in all areas, and therefore, that many

[[Page 41998]]

consumers must either pay long distance telephone charges or surcharges 
of $6.00 per hour to access its Internet service. The complaint alleges 
that the failure to disclose these material facts is a deceptive 
practice.
    In addition, the complaint alleges that respondent falsely claimed 
that a ``free'' emachines computer included a monitor at no additional 
cost. In fact, the monitor cost $139.99 or $199.99, depending on its 
size. The complaint also alleges that respondent falsely claimed that 
consumers could obtain the ``free'' emachines computer at no cost after 
rebates. In fact, in order to obtain the computer at no cost, consumers 
were required to subscribe to Prodigy Internet Service for three years 
at an additional cost of $19.95 per month or a full payment of $718.20. 
The complaint also alleges that in representing that consumers could 
obtain the ``free'' emachines computer at no cost after rebates 
respondent failed to disclose or failed to disclose adequately that: 
(a) Consumers were required to subscribe to Prodigy Internet service 
for three years at an additional cost of $19.95 per month or a total 
cost of $718.20; (b) consumers who cancel the Internet service within 
three years must repay the entire $400 rebate and pay a $50 
cancellation fee; and (c) Prodigy does not provide local access 
telephone numbers for its Internet service in all areas, and therefore, 
that many consumers must either pay long distance telephone charges or 
surcharges of $6.00 per hour to access its Internet service. The 
complaint alleges that the failure to disclose these material facts is 
a deceptive practice.
    The proposed consent order contains provisions designed to prevent 
respondent from engaging in similar acts and practices in the future.
    Part I of the proposed order prohibits respondent from making any 
misrepresentations as to the price or cost to consumers of any 
computer, computer-related product, or Internet access service.
    Part II of the proposed order prohibits respondent from making any 
representation about the price or cost to consumers of any computer, 
computer-related product, or Internet access service, when that price 
or cost, or any rebate, is conditioned upon the purchase of another 
product or service, unless respondent discloses clearly and 
conspicuously, and in close proximity to the price, cost or rebate 
representation that consumers must purchase the additional product or 
service in order to obtain the advertised price or rebate. In addition, 
Part II requires respondent to disclose the cost of the other product 
or service that must be purchased. Furthermore, if the advertised 
product or service is sold together with a service, respondent is also 
required to disclose the length of time that consumers are required to 
purchase that service. Part II also contains a proviso that permits 
respondent to use the terms ``rebate'' or ``discount'' without making 
the additional cost disclosers, as long as respondent does not describe 
or characterize the rebate or discount in any way.
    Part III of the proposed order prohibits the respondent from making 
any representation about the price or cost of any Internet access 
service it offers for sale, unless it discloses certain material facts. 
If consumers have to pay additional fees, charges, rebate repayments, 
or other costs to cancel the Internet access service, the amounts of 
such costs must be disclosed. If consumers may have to pay long 
distance telephone charges, hourly surcharges, or other costs in excess 
of local telephone fees to access the Internet service, this fact must 
be disclosed, along with a means for consumers to ascertain whether or 
not they would have to incur such costs and the amounts of any such 
costs. These disclosures must be clear and conspicuous.
    Part IV of the proposed order contains a document retention 
requirement, the purpose of which is to ensure compliance with the 
proposed order. It requires that respondent maintain copies of ads and 
promotional material that contain representations covered by the 
proposed order, and materials that were relied upon by respondent in 
disseminating the representations.
    Part V of the proposed order requires respondent to distribute 
copies of the order to various officers, agents and employees of 
respondent.
    Part VI of the proposed order requires respondent to notify the 
Commission of any changes in corporate structure that might affect 
compliance with the order.
    Part VII of the proposed order requires respondent to file with the 
Commission one or more reports detailing compliance with the order.
    Part VII of the proposed order is a ``sunset'' provision, dictating 
that the order will terminate twenty years from the date it is issued 
or twenty years after a complaint is filed in federal court, by the 
either the United States or the FTC, alleging any violation of the 
order.
    The purpose of this analysis is to facilitate public comment on the 
proposed order. It is not intended to constitute an official 
interpretation of the agreement and proposed order or to modify in any 
way their terms.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 00-17223 Filed 7-6-00; 8:45 am]
BILLING CODE 6750-01-M